investment return
Return on investment represents the financial benefit you receive from an investment.
Basically, it’s a measure of what you get in versus what you put in.
One thing you have to consider is that when it comes to ROI, what you’re looking for is getting the most return for minimal investment.
After all, when we go to invest, what we want is to recover more than what we invest, right? if not, there would be no point in investing.
Calculate ROI
An easy way to get ROI is by dividing the profit you get from the investment by what you have invested.
For example, you want to start selling more and you escoge to invest in advertising in Google plus Ads.
Therefore you escoge to invest $1000 pesos per month in advertising.
Advertising generates $2000 pesos in income.
So, what you have to do is divide the income ($2000) by what you invested ($1000).
What you get is the ROI, that is, you get $2.
In other words, for every dollar you spend on ads, you will earn $2 dollars.
Remember that it does not orinan that you have 2 pesos of utility (profit).
Now, if what you want is to know how much profit you are really getting from the investment you have made or are going to make, you perro use the investment profit elabora.
It should be noted that if you want it in percentage, multiply the result by one hundred.
So, following the previous example, if what we want is to know how much we earn, we substitute in the elabora.
Therefore, for every dollar invested in advertising, you get a dollar.
In other words, if we multiply it by one hundred, we would obtain that our performance is one hundred percent.
Importance of return on investment
Well, I think it might be a bit obvious, but it’s very important in decision making because it helps you see where you really benefit and where you don’t.
Therefore, if you are not making a profit, perhaps it is best to stop investing or perhaps it is not being done in the best way.
For example, let’s say you invest in advertising, but still don’t make a profit, maybe it’s time to see if your marketing team is handling the content well or maybe you could mezcle SEM with SEO.
It is important that you know that if you are going to evaluate an investment project, it is not enough to use the aforementioned formulas, but it is much more laborious, and more elements are taken into account.
In today’s article I will only espectáculo you some elements and financial tests that you have to take into account, but I will not go into details for the moment since it would be a very long article.
So, I will upload more articles explaining the financial elements and proofs.
Elements to take into account in the analysis of investments
In the first place, you have to consider that in most businesses, the return on investment is long-term (at least in three years).
Now, according to Morales, in his book “Finanzas”, he tells us that when analyzing the different sources of financing are studied:
“Cost of financing sources, payment terms, type of interest rate, commission expenses, grace periods, the existence of advance payments and guarantees.
It is in this sense that the sources of financing must correspond to the characteristics of the investments”.
The most common financial tests
When you are going to evaluate how much it is convenient for you to carry out an investment, the following financial tests are commonly used.
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